Reliance-Saudi Aramco $15 million deal cancelled on valuation concerns
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New Delhi: Reliance Industries and Saudi Aramco cancelled a deal that enabled the oil giant to buy a stake in the oil-to-chemicals (O2C) business of the Indian based conglomerate, Reuters reported. Sources informed that the move was due to valuation concerns.
They said that talks between the two broke over the valuation of Reliance's O2C business, as the world is on the path of leaving fossil fuels and emission reduction.
Reliance is to focus on signing multiple deals with companies to produce speciality chemicals for higher margins.
The world's largest oil exporter, Aramco, had signed a non-binding agreement to buy a 20% stake in Reliance's O2C business for 15 million dollars in 2019. Last week, both the companies announced a re-evaluation of the deal to end two years of negotiations.
A source said that the valuation of refining and petrochemicals had gone down after the recent COP26 climate talks in Glasgow. Despite this turn, Reliance stood rooted in the 75-billion-dollar valuation for the deal made in 2019. But evaluations by consultants showed a significant cut of more than 10%, the source added.
Meanwhile, without confirming whether the deal has been cancelled, Saudi Aramco said it has a long-lasting relationship with Reliance and will continue investing in India. Reliance also said that it would continue being the preferred partner for Saudi Aramco for investments in the private sector in India. Reliance is the biggest Indian buyer of Saudi oil.
Reuters report says Reliance aims to reach net-zero by 2035 and plans to switch to cleaner feedstock and energy at its O2C business. It plans to expand business in solar power, batteries, electrolyzers to produce hydrogen and hydrogen fuel cells.
Reliance also plans expansion in speciality chemicals- used in industries such as agrochemical, colourants, dyes, fast-moving consumer goods, pharmaceuticals, fuel additives, polymers, and textiles- demand for which is expected to rise in the future. In India, it is expected to rise from 32 billion dollars in 2019 to an estimated 64 billion dollars by 2025, a government report had found.